Morning Bites

🔗CISA mills daily crude steel production in late-July was 1.864mnt, down 7.5% from the previous ten days, and 6.0% lower YoY. Per CISA data, local production has declined 5.5% YTD (through 31 July). Meanwhile, local steel inventories also decreased 10.2% over the period, but were still up 10.2% YoY

Given the ongoing weakness in the global steel market, we believe that Beijing will continue to gradually tighten supply. Although the current five-year plan lacks explicit targets for capacity cuts, it is our view that China might also introduce additional strict supply-control measures, similar to the 2016-17 reform (when >100mnt steelmaking capacity was removed)

For instance, Beijing has recently imposed a more stringent steel capacity swap plan to curb oversupply. Per a Ministry of Industry and Information Technology statement, at least 1.5t of old steel capacity must now be decommissioned to build ⁠every 1.0t of new capacity nationwide

#steel